Making Sure They Get What’s Coming to Them – Tips for Effective Estate Planning

After decades of providing advice to clients as I guide them through complicated inheritance laws and tax regulations to achieve the most beneficial outcomes for their estate planning, I have learned an important lesson that I am compelled to pass on — All clients who died without a will thought they had more time. Don’t wait another week. I’ve seen too many painful family and business conflicts that could have been avoided if a will or trust was in place.

Terminology:

When I start working on estate planning with clients, I make sure that they understand the basic terms of the process before determining their best options. These include:

Will – a legal document that states your last wishes as to the disposition of your property. A will can name an executor, guardians for minor children, and details of payment of debts and taxes.

Living Trust – a vehicle to manage an estate and distribute property in which a trustee holds assets on behalf of a beneficiary, with the distribution governed by the provisions of the Trust Agreement. You can be your own Trustee or name a third person.

Testate-when a person dies with a Will. You can dictate the conditions under which your property will pass.

Intestate – when a decedent does not have a will he or she is said to have died intestate. The law of the state dictate the conditions under which your property will pass.

Administration – the legal process that takes place after death, which includes proving validity of will, appraising any property and paying debts and supervising the distribution of your property. If there is a will; it is known as Probate

Administrator – manager of the distribution of the assets as mandated by the laws of the state when there is no Will.

Personal Representative of Executor – manager of distribution of assets when there is a will.

Wills vs. Trusts

Trusts have become an increasingly popular choice for the distribution of property, but sometimes their benefits are overstated, particularly with the increase in the size of an estate that can pass free from estate taxation. . This is an area where it is advisable to work with an attorney to review your personal situation. By identifying and communicating your wishes for your family and business you can have confidence that you have made the best decisions for your family’s welfare while minimizing their tax liability.

Wills are attractive because they are much easier and less expensive to set up than trusts (although a will can also include very complicated provisions for the disposition of your property. A will puts the estate into probate which makes it part of the public record. Trusts avoid probate and are kept private. Neither Wills nor trusts do not cover any joint ownership property, retirement benefits, insurance policies or annuities which have a designated beneficiary, unless the beneficiary is the estate or the trust.

Both wills and trusts can include esoteric tax planning, but we generally recommend the use of trusts for estates that are large enough to be subject to estate taxation. A pour-over will can be created to add property not in the trust at death to the trust.. It is important with a trust to remember to amend it when new property is added to the estate. Again, the decision as to which legal approach is best for you should be carefully explained and completely understood before making the final decision, and no matter which way you choose, do it now if you haven’t done so already!